Tag Archives: Economic Reforms

Omar Everleny Pérez Villanueva: “The Current Deregulation of Cuban Enterprises”

Posted on October 2, 2013 by Arch Ritter

The complete document is available here:  Omar Everleny Pérez Villanueva, The Current Deregulation of Cuban Enterprises. Oct. 3 2013

Introduction

We cannot examine the last 50 years of Cuban economic activity without casting a critical eye. Even if we are clear about future goals, which are certainly full of challenges, an awareness of the pitfalls, errors, mistakes and misunderstandings from the past period may help to correct the future perspective.

 Cuba is undergoing changes directed at achieving efficiency and increasing the productivity of the state-run enterprises (the plan), where efficiency depends, among other factors, on productivity. Productivity can be increased from different sources, but the important factor is that although a company may be proactive in the search for solutions, it is not possible to be proactive while being heavily regulated.

 Various academic analyses show a decrease in the majority of state-owned economic sectors in the last 20 years, between the early 90’s and 2010, as well as in virtually all sectors, with the exception of a few, such as telecommunications, mining and construction, sectors that have received a strong injection of foreign capital since the early 90’s. Another study on skilled labor force shows low motivation, due to unsatisfactory wages, few moral and material incentives, organizational problems, over-qualification and, of course, technical materials problems.1

……….

Concluding Comment

On January 29, 2012, at the closing of the First National Conference of the Communist Party, Raul Castro stated that:

“The only thing that can lead to the defeat of the revolution and socialism in Cuba would be our inability to eradicate the mistakes made in the 50 years since January 1, 1959 and those that we incur in the future.”

 Following this thinking, it is clear that the challenges posed by the transformation at a relatively short term of the existing structural distortions in the Cuban economy. If we want Cuba to become a land of opportuni­ties and to achieve a sustained increase in the standard of living for all Cubans, then the time to make such decisions is not very far away, and the measures to take must be more pragmatic than those taken under the current government. At the same time we cannot forget to take into consideration the harassment that Cuba is subject to in its external transactions by the U.S. government.

IMG_0186.jpgd

DR. OMAR EVERLENY PEREZ VILLANUEVA

Professor at the University of Havana. Former director of the Centro de Estudios de la Economia Cubana at the University of Havana. Doctorate in Economic Sciences of the University of Havana in 1998. Masters in Economic and International Relations from CIDE, AC Mexico City, Mexico in 1990. Bachelors in Economics from the University of Havana in 1984.

Dr. Perez Villanueva has presented at conferences in various Cuban institutes as well as internationally, includ­ing in the United States, Japan, France, Canada, Spain, Brazil, Puerto Rico, Mexico, Dominican Republic, Venezuela, China, Malaysia, Argentina, Peru, Jamaica, Barbados, Trinidad and Tobago and Norway. He has served as a visiting professor at Universities in the United States, Japan and France and has published over 70 research papers in a variety of areas of the Cuban and global economy.

Dr. Perez Villanueva has also published over 75 articles in publications and has co-authored several books in Cuba and abroad, including “Cuban Economy at the Start of the Twenty-First Century,”  with Jorge Dominguez and Lorena Barberia (Harvard University. ISBN 0-674-01798-6, 2004), the second edition of “Reflections on the Cuban Economy” (Editorial Ciencias, Havana. ISBN 959-06-0839-6, 2006) and “Outlook fo the Cuban Economy I and II” (ISBN 978-959-303-004-5). His last book is “Fifty Years of the Cuban Economy” (Editorial Ciencias Sociales. Havana. ISBN 978-959-06-1239-8).

 

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Cuba pushes ahead on reforms but insists island not for sale

Posted on July 16, 2013 by Arch Ritter

By Marc Frank in Havana, Financial Times,  July 15, 2013 1:29 pm

Cuba’s efforts to build a more market-driven economy are moving from lifting prohibitions on personal property, travel and minor economic activity to reform of larger state companies. But one of the most powerful men in the land had bad news last week for those who might harbour hope of owning a piece of the Caribbean island.

 “Life has demonstrated that the state cannot occupy itself with the entire economy, that it must cede space to other forms of administration,” Marino Murillo, the man appointed to head President Raúl Castro’s reform efforts, told journalists visiting the country last week. But Mr Murillo, a member of the politburo and vice-president of the Council of Ministers, emphasised that it was a transfer of administration and not a “property of the people” reform.

Since Raúl Castro took over from his ailing brother Fidel Castro in 2008, and first began to institute austerity measures and reforms, the country’s current account has run a surplus, but economic growth has stagnated at just over 2 per cent annually. The Cuban Communist Party and government adopted a more than 300 point plan in 2011 to “update” the country’s economic and social model, “but the party made clear the changes were to take place within the limits of socialism”, Mr Murillo said.

Asked repeatedly about foreign investment opportunities, the officials offered nothing new at all, repeating stock lines about investment being complementary to their development schemes and that existing regulations were flexible and adequate.

Mr Murillo said the government was developing a list of offers that should be ready by 2014 and were planned to stimulate investment. The implication was that drawn-out negotiations over control of joint ventures, duration of the agreements, tax breaks and labour relations are unlikely to be resolved soon. The possible exception is a special economic zone in western Cuba expected to open next year and which is awaiting publication of its rules and regulations. None of the 190 companies managing and temporarily in joint ventures in Cuba own any property outright, nor do they have the right to sell shares except with the authorisation of their partner, the state.

The Havana Cross-Harbor Ferry Chasing a Container Ship

Mr Murillo said agriculture represented more or less what authorities envision for minor and secondary sectors of the economy.  The country has leased fallow state land to nearly 200,000 would-be farmers in recent years, loosened the regulation of co-operatives that were already leasing state land and freed up all agricultural actors to sell more of their produce (currently 47 per cent) on the open market, bypassing the state’s wholesale and retail outlets. “Eighty-one per cent of the land is social property owned by the people, and 70 per cent of the land is administered by co-operatives and small farmers,” he said. Twenty per cent is owned by small farmers and their private co-operatives.

Cuba has been busy fostering development of small businesses in retail services, transport, construction and minor production, and allowing market forces to govern their activities, along similar lines to the agricultural sector. The government is leasing taxis and thousands of state shops, with up to five workers, to its former employees or any takers, and this month began to transfer larger enterprises with 6 to around 50 workers to co-operative administrations, 124 to date, with another 71 approved.

Currently, 4m people out of the country’s 5.1m-member labour force work for the state, the remainder occupied in what is called the “non-state” sector, Mateu Pereira, an adviser to the minister of labour and social security, told the journalists. An estimated 1m Cubans of working age do not seek employment. The co-operatives are the first outside of agriculture since all businesses were nationalised in 1968. The government says many more establishments will follow, beginning in 2014.

The co-operatives function independently of the state on the basis of supply and demand, divide their profit among members and receive better tax treatment than individually owned businesses, according to Cuban officials. A decree law published in December allows for an unlimited number of members and use of contracted employees on a three-month basis.

Cuba will also begin deregulating state-run companies in 2014 as reform of the Soviet-style command economy moves from retail services and farming into its biggest enterprises, the head of the Communist Party’s reform efforts said. Mr Murillo said the 2014 economic plan included dozens of changes in how the companies, accountable for most economic activity in the country, did business.  The reforms will affect big state enterprises such as telecommunications company Etecsa, tourism corporations, trading company Cimex and sugar monopoly Azcuba.

Mr Murillo said changes include granting managers more autonomy and permission to sell excess products after meeting state obligations on the market, and allowing companies to retain half of their profits after taxes for such things as minor investment and wage increases.

Artesan market, La Rampa November 2008; not state enterprise

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Cuba to Embark on Deregulation of State Companies

Posted on July 9, 2013 by Arch Ritter

By Marc Frank; HAVANA | Mon Jul 8, 2013

Original here:  Cuba to embark on deregulation of state companies

HAVANA (Reuters) – Cuba will begin deregulating state-run companies in 2014 as reform of the Soviet-style command economy moves from retail services and farming into its biggest enterprises, the head of the Communist Party’s reform efforts said.

Politburo member and reform czar Marino Murillo said the 2014 economic plan included dozens of changes in how the companies, accountable for most economic activity in the country, did business. He made the comments in a closed-door speech to parliament deputies on Saturday, and some of his remarks were published by official media on Monday.

“The plan for the coming year has to be different,” Murillo was quoted as saying by Communist Party daily newspaper Granma. He said that of 136 directives for next year “51 impact directly on the transformation of the companies.”

The reforms will affect big state enterprises like nickel producer Cubaniquel and oil company Cubapetroleo and entail changes like allowing the firms to retain half of their profits for investment and wage increases and giving managers more authority. The plan also threatens nonprofitable concerns with closure if they fail to turn themselves around.

“Murillo’s empowerment of state-run companies is a milestone on the road toward a new Cuban model of state capitalism, where senior managers of government-owned firms become market-driven entrepreneurs,” said Richard Feinberg of the Washington-based Brookings Institution and an expert on Cuba’s economy.

“But only time will tell whether the government is willing to truly submit the big firms to market discipline – to let the inefficient ones go bankrupt,” he said.

Murillo cited the Communist Party’s reform plan, adopted in 2011, which he said called for freeing productive forces to increase efficiency and reducing how companies’ performance was measured to a few indicators such as profit and productivity.

Already this month, 124 small to medium state businesses, from produce markets to minor transportation and construction concerns, were leased to private cooperatives which, with few exceptions, operate on the basis of supply and demand and share profits.

Hundreds more were expected to follow in the coming years as the state moves out of secondary economic activity such as retailing and farming in favor of individual initiative and open markets under reforms orchestrated by President Raul Castro, who took over for his ailing brother Fidel in 2008.

Cuba’s economy was more than 90 percent in state hands up until 2008 and almost all of the its labor force of 5 million workers were state employees.

Cuba began laying off hundreds of thousands of state workers and deregulated small retail services in 2010, simultaneously creating a “non-state” sector of more than 430,000 private businesses and their employees as of July and leasing land to 180,000 would-be farmers.

Now larger enterprises, from communications, energy and mining to metal works, shipping, foreign and domestic trade, are being tweaked as the country strives to avoid bankruptcy and boost growth, which has averaged around 2 percent annually since the reforms began.

John Kirk, one of Canada’s leading academic experts on Latin America and author of a number of books on Cuba, summed up the changes announced by Murillo: “Cuba maintains its path towards a mixed economy.”

“It appears as if government determination to modernize the economy is slowly overcoming the profoundly rooted inertia of the bureaucracy,” he said.

 

CUPET: Out of gas? 

ELIMINATING BARRIERS

Murillo said companies would keep 50 percent of profits for recapitalization, minor investments, wage raises and other activities, instead of handing over all profits to the state and then waiting for permission to spend the money.

“The plan is designed so that a businessman from whatever sector does not have to ask permission to make minor investments to ensure production does not stop,” Murillo was quoted as saying.

“It eliminates administrative barriers to salary payments, which directors of companies can decide on, always and when they have sufficient profits to cover them,” he said.

Companies, which in the past were assigned hard currency for imports, will now be able to use the money to purchase local products.

“If an institution has … $200 million to import, and a local producer can produce what it plans to import, this body can directly pay that local producer with the approved funds,” Murillo said.

At the same time state firms that have reported losses for two years or more will be expected to turn a profit or they will be downsized, merged with others or closed.

“We can’t make a plan that includes companies like these … because the phenomena of having to finance these losses will persist,” Murillo said.

Cuba has already implemented some measures to set the stage for state company reform.

Most companies have been moved out of government ministries in favor of operating as “independent” holding companies and in some cases, such as in tourism, allowed to keep a percentage of revenues.

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Economic Reform in Cuba: A Private Affair

Posted on June 28, 2013 by Arch Ritter

Hesitantly, wholesale markets are becoming more established

FROM the Bay of Pigs to Che Guevara’s mausoleum, there is plenty for revolutionary tourists to see in Cuba. For economic junkies there should soon be a new item on the itinerary: Cuba’s first privately run wholesale market in half a century.

At present it is a nondescript warehouse of green-painted concrete near Havana’s airport. It is unmarked, and so few locals know about it that your correspondent drove past several times before finding it. But state media say it will open on July 1st. It is a source of excitement for those who will occupy it, because it will replace the muddy scrubland where drivers of hundreds of old trucks have been gathering on the outskirts of Havana to sell fruit and vegetables in bulk, always concerned that at any moment their makeshift trading post could be shut down.

They see the new premises as a further step on Cuba’s hesitant path towards freeing up wholesale markets and loosening the state’s control of food distribution. A farmer, sitting under a banana tree next to his cargo, proudly displays a handful of permits that he has recently paid for, covering everything from selling crops to owning and driving a delivery truck. He says that in the past, when the police caught him trying to drive produce to Havana without a licence, they would seize it and give it to a nearby hospital. “They can’t stop me now,” he says.

However, his ability to sell a broader selection of crops remains stymied by a shortage of seeds and fertilisers, supplies of which will not be available in the new market. Such inputs are still controlled by the state, he says, stroking his chin in a gesture that is meant to resemble Fidel Castro’s beard. The only way for a farmer to acquire more than he is allotted is via the black market.

The benefits of burgeoning wholesale trade are evident in a stroll through the back streets of Old Havana. Handcarts owned by private traders overflow with ripe mangos, avocados and limes, whereas government outlets nearby contain a few tired-looking pineapples.

Although wholesale produce is becoming more widely available, the government is only gingerly broadening wholesale trade to other supplies. Restaurant owners, for example, want to be able to buy flour, cooking oil, beer and soft drinks in bulk. Only a few shops provide these. The same is true of construction materials. “We don’t have anything like a Costco, where you can buy 20 crates of beer,” says Omar Everleny, a Cuban economist.

Partly to put such concerns to rest, the government announced in early June that it would gradually permit a variety of wholesale goods to be sold to state-run and privately run businesses, apparently building on an experiment started three months earlier on Isla de la Juventud, an island in western Cuba where Fidel Castro was imprisoned before his revolutionary victory in 1959. A pilot project to sell equipment to private farmers is also said to be taking place on the island. More than helping businessmen, the government’s priority in promoting such changes appears to be to raise output. So far, however, the reforms have been too half-hearted to achieve that.

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Cuba’s Economic System: Reform or Change?

Posted on June 21, 2013 by Arch Ritter

 

Fernando Ravsberg, June 20, 2013 HAVANA TIMES

Marino Murillo, Vice-Chairman of Cuba’s Council of Ministers and architect of the island’s recent economic reforms, has urged the country to aim for growth by eliminating “all of the obstacles that the current economic model places in the way of the development of the productive forces.”

The problem is that the greatest obstacle could be the model itself, which is based on relations of production that hinder the country’s economic development, slow down changes, interfere with reforms and bring about discontent among the population.

By implementing this socialist model, which dates back to Stalin’s time, Cuba obtained the same results seen in all other countries which copied it: agricultural production crises, industrial stagnation, shortages and a disaffected citizenry.

Marino Murillo, Vice-Chairman of Cuba’s Council of Ministers

Murillo invoked socialism’s theoretical forefathers, who said that the new, socialist society would need to nationalize only the “fundamental means of production”, a prescription that wasn’t exactly followed by a model which placed even junk food stands in State hands.

To be at all effective, every economic change essayed in the country today, no matter how small, invariably demands a whole series of subsequent reforms. And it is precisely there where the model, and its defenders, prevent the reform from becoming effective or yielding its best results.

Though the Cuban government’s official discourse itself is calling for a “rejuvenation” of the country’s model, the fact of the matter is that it will be next to impossible to fit a new piece into this jigsaw puzzle without altering the pieces around it, without producing a domino-effect that will ultimately change the entire pattern.

Though the Cuban government’s official discourse itself is calling for a “rejuvenation” of the country’s model, the fact of the matter is that it will be next to impossible to fit a new piece into this jigsaw puzzle without altering the pieces around it, without producing a domino-effect that will ultimately change the entire pattern.

The government runs into these obstacles every time it attempts to move one of the pieces of the puzzle. When it decided to hand over State-controlled lands to the peasants, officials invoked Cuba’s “current legislation” to forbid farmers to set up their homes in farm areas.

Such absurd restrictions discouraged many and pushed others to quit the food production sector altogether and devote themselves to securing construction materials illegally, so as to be able to build a home elsewhere, far from prying looks.

Massive and hugely inefficient, the agricultural sector may well be the very paradigm of bureaucratic mismanagement, but it is far from being its only expression in the country. Cuba’s import system is a true bureaucratic gem, in which producers are those with the least say in official decisions.

A Cuban factory wishing to import a piece of equipment from abroad is required to approach the importing company assigned to it by the State. Technically speaking, this “importer” does not actually import anything – it merely puts out a bid among foreign companies with offices in Cuba.

Employees from these companies are the ones who travel to the manufacturing country, purchase the equipment and bring it back to Cuba. Under the country’s current model, the manager of a Cuban factory is expressly forbidden from contacting the foreign export company directly.

Thus, the person who makes the order is an office clerk who knows little or nothing about what the company needs and who, in the best of scenarios, will opt for the cheapest piece of equipment available, something which often leads to serious production problems later.

The status quo relations of production continue to find support in Cuba, from the defenders of “Real Socialism.” Ironically, or not surprisingly, most of them are isolated from the reality of this socialist system, enjoying government perks that compensate for the “small inconveniences” of everyday life.

In the worst cases, these “intermediating State importers” are bribed by foreign companies so that they will purchase obsolete or poor-quality equipment. In recent weeks, Cuban courts tried hundreds of State employees implicated in these types of “deals”.

These are the “relations of production” which keep equipment in Cuban factories paralyzed for months, waiting for the needed spare parts, while State importers take all the time in the world to decide what to purchase.

Most Cubans I know support the changes that have been implemented thus far and want these to make headway quickly and effectively. It is hard to come by anyone who feels nostalgia for the old model, which proved more efficient in establishing restrictions than in satisfying the material needs of the population.

But these relations of production continue to find support in Cuba, from the defenders of “Real Socialism.” Ironically, or not surprisingly, most of them are isolated from the reality of this socialist system, enjoying government perks that compensate for the “small inconveniences” of everyday life.

During a recent debate, a Cuban journalist suggested that these officials catch a city bus from time to time, so as to immerse themselves in everyday reality. When they told me of this, I recalled the old anarchist graffiti which warned us that “those who do not live the way they think end up thinking the way they live.”

Fernando Ravsberg

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Remittances Drive the Cuban Economy

Posted on June 11, 2013 by Arch Ritter

By Emilio Morales and Joseph L. Scarpaci, Miami (The Havana Consulting Group).— Fidel Castro’s government reluctantly accepted remittances from abroad in 1993 when it realized it needed access to hard currency to survive.

It was a devastating ideological blow at the beginning of the so-called ‘Special Period in a Time of Peace’ because it revealed that the Cuban exile community had become a lifeline for the island. Suddenly, U.S. dollars started inundating the island and would never leave. Both the Cuban society and the exile community were startled by this bold move.

The former Cuban leader probably never imagined that the forced opening up to dollars was going to become the most efficient driver in the economy over the last 20 years. Not a single Cuban economist foresaw that outcome. Today, remittances reach 62% of Cuban households, sustain about 90% of the retail market, and provide tens of thousands of jobs.

Money sent from overseas far exceeds the value of the once powerful sugar industry which, in 1993, began a huge decline from which it has not recovered. Remittances in 2013 surpass net profits from tourism, nickel, and medical products manufactured by the Cuban biotech industry.

Table 1. Remittances versus Other Sources of Hard Currency in Cuba, 2012 (in millions of US dollars)

No.

Source

2012

1

Remittances received in cash

$2,605.12

2

In-kind remittances

$2,500.00

3

Total remittances

$5,105.12

4

Tourism revenues

$2,613.30

5

Nickel exports

$1,413.00

6

Pharmaceutical exports

$500.00

7

Sugar exports

$391.30

Data sources: Calculated by The Havana Consulting Group, based on their data and open-source statistics published by the Oficina Nacional de Estadísticas e Información (ONEI), Havana.

The table above shows that remittances ($5.1 billion) outstrip the leading four sectors of the Cuban economy combined ($4.9 billion). Moreover, the figures for items 4 through 7 do not take into account expenses incurred in generating those gross revenues (i.e., costs of processing sugar, manufacturing drugs, food imports, etc.). Sending remittances does not cost the Cuban government money, but it circulates throughout he economy and supports most Cubans in some way.

White House Policies Trigger Growth in Remittances

Barack Obama’s arrival in the White House has directly influenced the increase in money being sent to Cuba. In the past four years, $1 billion USD of remittances have infused the Cuban economy.

Cash remittances in 2012 reached a record $2.61 billion USD; a 13.5% increase over 2011.

In other words, cash remittances outweigh government salaries by 3 to 1. The current monthly mean salary according to ONEI (the official government statistics agency) is 445 Cuban pesos, or the equivalent of just under $19 USD. Today, the economically active work force is 5.01 million workers, of which about 80% (4.08 million) draw state paychecks, whereas the balance is self-employed, agricultural, or cooperative workers.

If we use the official exchange rates that one Cuban convertible peso (CUC) equals 24 pesos (CUP) or one US dollar, the annual payout for state workers is three times less than the volume of money that Cuban émigrés send to family back home. Include in-kind remittance contributions (gifts, appliances, clothing, etc., brought to Cuba during visits), and the ratio leaps to 5.5 to 1.

Behind this growth in sending money to Cuba is the opening up of travel to Cuba as well as eliminating restrictions on sending money there. In 2012, just over a half a million Cubans residing abroad visited Cuba, making them the second largest tourist group in the island’s market; only Canadians (1.1 million visits) surpass them.

Out-migration from Cuba –about 47,000 annually on average over the past decade or nearly a half million émigrés—is also a contributing factor because those who have most recently left the island are the ones most inclined to send money back home. That was not the pattern with the original exile community in the 1960s; sending dollars to the island was forbidden back then.

We also need to acknowledge that several reforms introduced by the Cuban government in the past three years have encouraged remittances. This cash infusion helps to start home restaurants (paladares), B&Bs, car rentals, and more recently the buying and selling of private cars and real-estate. These businesses are aided by the 1.6 million cell phones in use today –available to the general public only since 2007—of which 70% are paid for by Cubans living off the island.

Never at a loss to encourage remittances, the Cuban government announced just last month the opening of 118 Internet stations that charge very high hourly rates. The new cyber cafés will initially cluster in the tourist poles across the island and the provincial-capital cities.

At the present, then, the role the Cuban diaspora plays in developing the island’s economy has never been greater, despite the restrictions on how and where money can be invested. However, the short term is unlikely to witness a greater influx of capital beyond the diaspora’s giving. Witness the failures in recent offshore gas and oil oil drillings that have come up ‘dry’ and the political and economic crisis in post-Chávez Venezuela is mired. This may create a broader space for the exiles to have a more direct hand in rebuilding the country.

Like it or not, Cuban exiles carry economic clout on the island. They have a lot of skin in the game; some of it is economic, and a lot of it is love of family. Their role in shaping the lives of many will be transformative in years to come, and on both shorelines that straddle the Florida Straits.

Last Updated (Tuesday, 11 June 2013 04:20)

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Policy Options for Cuba’s Development: Preparing for the Post-Embargo Era

Posted on May 31, 2013 by Arch Ritter

Below are hyperlinks to presentations at a conference in Havana in April 25-26 on policy possibilities for the Cuban economy and potential insights from the experiences of other countries including Sweden, Brazil, Vietnam and China. The original links are at the web site of NUPI, the , here: Policy Options for Cuba.

Policy Options for Cuba’s Development: Preparing for the Post-Embargo Era

This project aims at supporting the work of Cuban economists and social scientists – those living in Cuba and abroad – who have argued for substantial economic reform and new socio-development strategies.

Deltakere

Fulvio Castellacci1
Morten Skumsrud Andersen2
Vegard Bye3
4

Claes Brundenius, Professor, Lund University

The final conference of phase 2 of this project took place in Havana on April 25th and 26th 2013. All presentations from this conference can be downloaded below.

Presentations:

Conference programme5

1. Welcome Remarks (eng) – Castellacci6

2. The updating of the Cuban Economic Model (spa) – Pérez Villanueva7

3. Economic Development in Cuba (eng) – Torres Pérez8

4. Reforms in Cuba in light of experiences from China and Vietnam (spa) – De Miranda Parrondo9

5. Entrepreneurship, Innovation and SMEs: Can the Cuban Reform Process Learn from Vietnam? (eng) – Brundenius10

6. Innovation and Entrepreneurship: The Case of University Start Up Companies in China (eng) – Li11

7. Innovation, Absorptive Capacity and Growth Heterogeneity: Cuba in a Latin American Perspective (1970–2010) (eng) – Castellacci and Natera12

8. Institutions and innovation in the process of economic change (eng) – Alonso13

9. Challenges for an Efficient Cuban Economy in Times of Increasing Heterogeneity and Uncertainties (eng) – Fernández Estrada14

10. Towards a new taxation in Cuba (spa) – Pons Pérez15

11. The key to inclusive economic groth in Cuba (spa) – Sagebien16

12. The politics of Science, Technology and Innovation in Cuba (spa) – Núñez Jover17

13. Main problems for innovation in Cuban enterprises18

14. Innovation and Entrepreneurship: Challenges for Local Development in the university centers of Santiago de Cuba (eng) – Sayous and Soler19

15. Structural change in Brazil – A Latin American Experience (spa) – Vasconcelos20

16. The Swedish Innovation System: The Role of Government and its Support to SMEs (eng) – Schwaag Serger21

21

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THE POLITICS OF CUBAN TRANSFORMATION—WHAT SPACE FOR AUTHORITARIAN WITHDRAWAL?

Posted on May 6, 2013 by Arch Ritter

An excellent exploration of Cuba’s possible political furures was presented by Norwegian Political Scientist Vegard Bye at the 2012 ASCE Conference and has just been made available in the ASCE Conference  Proceedings for 2012. Excerpts from the Introduction are presented below. The full study, well worth a close reading, is here: WHAT SPACE FOR AUTHORITARIAN WITHDRAWAL?

By Vegard Bye

Cuba is in the process of undergoing significant— perhaps fundamental—economic reforms. Although the pace is not always very fast, and the direction is more characterized by zigzagging that by a straight line, there is little doubt that the state-dominated economy is about to give way to more non-state actors. In theory and ideology, the official line confirmed at the 2011 Party Congress is still that “plan”  and not “market” is the guiding principle. But in practice, plans drawn up by the state bureaucracy play a rapidly diminishing role in the “really existing  economy.” State bureaucrats, however, seem to be practicing considerable “civil disobedience” by dragging their feet in the implementation of reforms approved by the party leadership, as Raúl Castro himself

So far, the discussion of reforms in Cuba has almost exclusively focused on economic aspects. The VI Party Congress in April 2011 was exclusively dedicated to economic reform, or “updating [actualización] of the economic model,” which is the politically correct but not very adequate expression. The Party Congress, and the comprehensive debate within Cuban society leading up to it, led to quite significantly rising expectations about economic prospects in Cuba, both for the country as a whole and for individuals and families, although the confidence in the present  leadership’s capacity to solve Cuba’s deep problems seems to be rapidly falling.

………

This article is part of a research project with the objective of making an on-going assessment of the dynamics between economic and political transformations in Cuba by comparing these to theoretical and empirical literature on other transition experiences: democratic transitions in Latin America as well as Southern and Eastern Europe, the on-going struggle between democratic and authoritarian trends in the former USSR (and even some newly democratized Eastern European countries), and the authoritarian market transition taking place in China and Vietnam.

 The general hypothesis is that the economic reforms in Cuba are slowly moving the country from a totalitarian to a post-totalitarian society (referring to a typology developed by Linz & Stepan2), with potential for the emergence of an increasing although limited democratic space, but alternatively for the emergence of  a post-Castro authoritarian political-economic elite not least linked to the Armed Forces. Three alternative scenarios are developed to reflect these options. It is believed that the study of two transition processes (agricultural reform and the emerging entrepreneurship), understood within Cuba’s international context and with an additional view to the impact of a future oil economy, will offer a good indication as to which of these three scenarios will have more prominence in Cuba’s political development.

  Vegard Bye is a Norwegian political scientist, Associate Research Fellow at the Norwegian Institute of International Affairs, and Partner in the consulting company Scanteam. His work record includes senior positions with the UN and Norad (Norway’s Development Cooperation Agency), long experience as reporter and part-time university lecturer and thesis supervisor. He has written various books on Latin American topics, and has followed Cuba since working there with the UN in the late 1970s.

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“Private sector bites into Cuban state food sales”

Posted on March 28, 2013 by Arch Ritter

* First wholesale market opens in Havana; State share of food sales declines

By Marc Frank, Reuters,  Wed Mar 27, 2013

HAVANA, March 27 (Reuters) – Cubans are building private food distribution networks from the farm through to retail outlets as communist authorities gradually dismantle the state’s monopoly on the purchase and sale of agricultural products.

The country’s first wholesale produce market is up and running on the outskirts of Havana and across the island farmers report they are selling more of their goods directly to customers, ranging from hotels to individual vendors.

Those involved say the change is speeding the flow of food to market, helping end longstanding inefficiencies that often left crops to rot in fields and putting more money in the pockets of producers.

“We purchased two old trucks this year, in part to deliver produce to our state clients in Camaguey,” said the president of a cooperative near the city in central Cuba.

“A few years ago we had to sell everything to the state, which then sold it to our clients a few days later. Now it arrives fresh and we keep the 21 percent profit that went to the state wholesaler,” he said, asking to remain anonymous.

Private trucks, some dating back to the 1950s and beyond, clatter into cities and towns delivering goods to kiosks and stalls run by private farm cooperatives or their surrogates.

In eastern Santiago de Cuba, the trucks roll into retail markets where private food vendors, who roam the streets with horse-drawn wagons, push and tricycle carts, gather to buy.

With the country importing around 60 percent of its food and private farmers outperforming state farms on a fraction of the land, authorities are gradually deregulating the sector and leasing fallow land to would-be farmers.

At the same time private truckers and vendors are being licensed as part of an opening to small businesses, with 400,000 people, including employees, now working in what’s called the “non-state” sector.

SLOW GOING

It is slow going, with farm output up just a few percentage points since President Raul Castro, who replaced his ailing brother Fidel in 2008, began agricultural reforms as part of a broader effort to “modernize” the Soviet-style economy.

Local farmers and experts say resistant bureaucrats, cautious leadership, the state’s continued monopoly on farm inputs and a lack of financing are holding up growth.

Yet, deregulation is gradually taking hold and private supply chains, whose participants were once labeled “parasitic middlemen” and even criminals by authorities, are emerging, now with the state’s blessing.

“The farmers harvest all this in the mornings, put it in sacks and weigh it, then truckers bring it in,” said purchaser Ariel Gonzales, leaning on his tricycle cart loaded with onions, garlic, carrots and other items at the Havana wholesale market.

“The food arrives the same day, it’s all fresh and at 50 percent or less of retail prices,” Gonzalez, who delivers to three small Havana retail outlets, said.

“Of course, when it rains this all turns to mud. You would think the government would pave it,” he said. “After all, we are feeding Havana.”

Five years ago 85 percent of all food produced in the country was contracted and sold by the state. By last year it had fallen to below 60 percent, according to the government. Within a few years it is expected to bottom out at around 35 percent, mainly root vegetables, grains and export crops.

“These are products not included in any contract with the state. You can sell them freely,” said Homero Rivero, a small farmer turned part time trucker and wholesale vendor as he supervised the unloading of sacks of cucumbers, crates of tomatoes and other vegetables from a vintage Ford truck.

Hundreds of purchasers swarm the area bidding for the goods, often accompanied by strapping young men with tricycle carts hired to move the produce to waiting vehicles.

FOOD NO LONGER WASTED

Rivero’s old Ford was one of many similar vintage vehicles piled with fruit, garden and root vegetables late Tuesday afternoon, even as dozens more waited to enter the makeshift market on an unpaved lot at the edge of the Cuban capital.

The market opens in the afternoon and runs into the late evening.

The scene is chaotic and crude and the trucks and carts decrepit, reflecting the precarious state of the country’s agricultural infrastructure.

“The law is that there is no law, you can do what you want with these products,” said Rivero, who is from the adjoining province of Mayabeque.

Cuba’s capital is home to 2.1 million people, 20 percent of the country’s population and is far wealthier than other cities.

Trucks arrived from all over the island, for example hawking pineapples and oranges at 7 pesos and 2 pesos each from Matanzas, 70 miles (112 km) to the east, compared with the local retail price of 15 pesos and 4 to 5 pesos respectively.

Jaimito Alvarez, who comes into Havana every 10 days from Pinar del Rio, 100 miles (160 km) to the west, said before the produce was often wasted.

“Before, if you produced more than planned, you were lucky if the state picked it up. Private food sales were forbidden and usually some of your crop rotted in the fields or was fed to the pigs,” Alvarez said.

State Sector Retailing circa 2000

State Sector retailing, 1969; Photo by Arch Ritter

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Cubans on the move as new real estate market grows

Posted on March 20, 2013 by Arch Ritter

 

By Jeff Franks

HAVANA | Wed Mar 20, 2013

HAVANA (Reuters) – At an informal housing market on Havana’s historic Paseo del Prado, Renaldo Belen puts the hard sell on a prospective buyer under a tree hung with hand-lettered signs advertising homes for sale.

A house near Boyeros, the avenue to the city’s airport, is being offered for the equivalent of $120,000, with all the amenities.

“The house is beautiful; it has four bedrooms, a pool with a bar and a fountain with a lion’s head on top. Look,” says Belen, pointing to photos on the sign, “water comes out of the lion’s mouth.”

Pausing for dramatic effect, Belen, one of the many touts, or “runners” working at the market, delivers what he hopes will be the coup de grace.

“This place needs no work. It is of capitalist construction,” he says, using a now frequently invoked commendation meaning it was built before Cuba’s 1959 revolution and is therefore of superior quality.

Given that “capitalist” has been a dirty word in communist-run Cuba for the last half century, the description perhaps grates on the nerves of Cuban leaders.

But its widespread usage is a sign of the times on the Caribbean island, where President Raul Castro has loosened things up as he tries to modernize the country’s economy in the name of preserving the socialist system put in place by his older brother Fidel Castro.

HOME SALES REPLACE SWAPPING

In November 2011, the government decreed that Cubans could buy and sell homes for the first time since the early days of the revolution, paving the way for a real estate market that has become an exercise in bare-knuckled capitalism. Previously, Cubans could only do swaps – or “permutas,” in Spanish – with their houses.

“For Sale” signs are now a common sight on homes and apartments across the country, more than 100,000 properties are posted for sale on Internet sites and even state television has gotten in on the act, devoting part of a daily show to sales announcements sent in by viewers.

The government last released figures on the market in September 2012 when it said 45,000 dwellings had changed hands in the first eight months of the year, partly through sales, but mostly through “donations.”

Cubans, accustomed to finding ways around heavy-handed government rules and regulations, say many sales are disguised as donations to avoid paying sales fees and taxes.

The new market, despite its apparent vibrancy, is still sorting itself out and still faces hurdles. The main one is that many people are trying to sell and few Cubans, who receive various social benefits but earn on average the equivalent of $19 a month, have the money to buy.

“With the new law, you can sell your house, but there’s no money, nobody to buy. There’s more being offered than there is demand,” said retired economist and math professor Raul Cruz, who has had his apartment in the Vedado district on the market for five months.

Havana was once considered an architectural jewel with an eclectic mix of colonial homes and modern Art Deco construction, but much of the city outside the touristy Old Havana district is in a dilapidated state after decades of neglect and corrosion from humidity and salty sea air.

A study by a Miami-based group found that asking prices range from the equivalent of $5,000 to $1 million, with a median price range between $25,000 and $40,000. Cuba has two currencies, the peso and the convertible peso, the latter of which is used in most housing transactions and is pegged one-to-one with the U.S. dollar.

FOREIGN BUYERS?

What has developed is a two-tier market, the runners at Paseo del Prado say, with Cubans mostly buying small places for between $5,000 and $10,000 and foreigners with Cuban connections buying the more expensive properties.

Sixty-year-old graphic designer Pepin, who did not want to give his full name, has been trying for six months to sell his nearly century-old Vedado home, two stories and painted blue, for $130,000.

So far almost everyone taking a look has been a foreigner or a Cuban with family abroad providing the money, he said, and all have tried to bargain for a lower price.

“One Chinese man, for example, offered me 80,000, but I’m not desperate or anything. If they give me what I want, fine. If not, I’ll stay here,” he said, relaxing in a chair on his plant-enshrouded front porch.

By law, the market is open only to Cubans on the island or those living temporarily abroad. But foreigners, including Cubans living in the United States or other countries, are buying properties in the names of Cuban spouses, family members or friends.

Companies with offices abroad have sprung up to cater to foreign buyers, posting photographs and descriptions of properties across the country on the Internet. Attempts to speak with one of them, Point2Cuba, went unanswered.

The reasons foreigners buy are varied, said Emilio Morales, president of the Havana Consulting Group in Miami.

“I have heard of people who are buying homes and turning them into businesses,” he said. “Some are looking for an investment, others doing it for their family (in Cuba).”

The Cuban government has laid the groundwork for allowing foreigners to buy property on the island, but only in resort developments for which approval has been pending for years.

It could inject billions of dollars into the cash-strapped economy by opening the real estate market to all in a new foreign investment law, said Morales.

BARGAIN HUNTING

Information on pricing in the real estate market is sketchy, but the general sense among Cubans is that asking prices began high and have come down somewhat.

Most blame the drop on the supply and demand problems, while others point the finger at another Raul Castro reform – a newly liberalized migration law, which took effect on January 14 and makes it easier for Cubans to go abroad.

“Prices have dropped now because there’s a greater incentive after January 14 to sell and abandon the country. Which is to say that people hurry up and want to sell quickly,” said Roberto Perez, who is trying to sell his two-story home near the sea in Havana ‘s Playa district for $200,000.

The prices depend on the necessity of the seller. “Someone who has a visa (to go to another country) and has a house worth 60,000 may sell it for 30,000,” said Belen, the Paseo del Prado runner.

Selling is being driven by Cubans wanting to cash in on the sole major asset most of them have. One of the quirks of Cuban communism is that while most things are property of the state, the vast majority of the country’s 3.2 million homes are owned by the people living in them.

“This is one of the things that gave longevity to the Revolution. They have something that most people in Latin America don’t have and wish for,” said Miami lawyer Antonio Zamora, a Cuban American who visits the island frequently.

While some sellers want to sell so they can leave, many simply want the money so they can live better in Cuba. Most said they would use part of the money to buy a smaller house, then live off the rest or use it to open a business.

Need and the low economic standards on the island have created some incredible bargains for people accustomed to paying high housing prices in other countries.

One woman, who did not want to give her name or the location of her residence, said she had recently sold the six-bedroom penthouse with a sweeping sea view she shared with several family members for the equivalent of $130,000. The buyer was a European with a Cuban spouse.

“I know it’s going to be worth a lot more in 10 years but everybody in the family wanted the money now. When we were moving out, a man came running up and told me he would give me 50,000 more than whatever the sale price was, but we had already signed the contract,” she said with a sigh.

Zamora, the Miami lawyer, predicted that Cuba would one day be a big market for Cuban Americas retirees.

“This is going to be huge,” he said, noting that Cuba has low crime and health costs, as well as good airport connections to the United States and a well developed money transfer industry for remittances.

“$750 in social security in the U.S. is nothing here in Miami but it can go a long way in Cuba,” he said.

(Additional reporting by Nelson Acosta and Rosa Tania Valdes in Havana and David Adams in Miami; Editing by David Adams and Claudia Parsons)

Arranging “Permutas” in Havana’s Pre-2012 Informal Housing Market, on Paseo del Prado 

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